Patient Financing 101: The Basics You Need to Know

The rising cost of healthcare is placing a greater financial burden on patients, making it harder for many to afford necessary medical care. At the same time, healthcare providers are facing declining reimbursements and increasing operational costs, making it critical for them to collect patient payments efficiently. In this landscape, patient financing has become an essential tool to bridge the affordability gap and ensure that help patients access care without financial strain. 

What Is Patient Financing?

Patient financing allows individuals to spread the cost of their medical care over time, rather than paying the full amount upfront.  For patients, financing makes healthcare expenses more manageable, and for providers, it can support patient payments without creating an overwhelming burden on patients at the time of service. 

CarePayment is an open-ended line of credit offered to patients through participating healthcare providers. Unlike a fixed-term installment loan or a medical credit card, CarePayment can accommodate eligible healthcare balances over time, with zero interest charged over the life of the loan.

How Does Patient Financing Work?

Healthcare providers can partner with third-party financing companies that manage payment plans for patients. When a patient opts for financing, the provider often receives payment from the financier upfront, and the patient repays the financing company over time. Depending on the financing model, patients may be able to select from different repayment terms, interest structures, and plan durations to best fit their financial situation.

Recourse vs. Non-Recourse vs. Hybrid Financing

One of the most important distinctions in patient financing is whether the option is recourse, non-recourse, or hybrid financing.

• Recourse Financing: In this model, a hospital partners with a patient financing company and sends patient balances to the financing partner to manage and collect payment. Should a patient fail to pay, the debt is returned to the healthcare provider, who shares the risk of patients not paying their bill with the patient financing company.
• Non-Recourse Financing: Under this model, when a patient account becomes delinquent, it remains with the patient financing vendor. Because the financing vendor assumes more of the financial risk, non-recourse arrangements may have different qualification requirements, costs, and financing terms.
• Hybrid Financing: Unique to CarePayment, Hybrid financing combines the best parts of recourse and non-recourse financing. In this model, financial responsibility and risk is shared between the provider and financing company.

Understanding the difference between financing structures can help patients and providers make informed choices. To learn more, check out this detailed guide on recourse vs. non-recourse financing. and CarePayment’s hybrid financing option. 

Understanding Interest and Different Financing Options

When considering patient financing, it’s essential to understand how different financing models apply interest and fees. 

Interest and APR 

Interest rates, often measured as an Annual Percentage Rate (APR), determine how much extra a patient will ultimately pay for their financing. APR is the annual cost of borrowing, expressed as a percentage, that a borrower must pay in addition to the principal (the original amount borrowed). High APRs can significantly increase the total cost of medical care, while  lower-interest or 0% APR financing options can help patients save money over time. 

Medical Credit Cards 

Medical credit cards are designed specifically for healthcare expenses. They may offer an initial zero-interest promotional period, but once that period ends, high-interest rates may apply. With some offers, failing to pay off their balance within the promotional period may result in steep retroactive interest charges. For a comparison between zero-interest financing and medical credit cards, visit this guide.  

Deferred Interest Plans 

Deferred interest plans may advertise no interest for a certain period. However, if the patient does not pay off the balance in full by the time the promotional period ends, interest may be applied retroactively to the original financed amount- not just the remaining balance. This can leave patients with unexpectedly large bills and financial strain. Learn more about the risks of deferred interest here. 

Zero-Interest Financing 

Zero-interest financing is one of the most patient-friendly options, allowing patients to pay for their care over time without accruing any interest. Unlike medical credit cards or deferred interest offers, zero-interest financing programs do not retroactively apply interest and do not rely on promotional periods that expire. This provides greater transparency and affordability for patients. CarePayment’s program is always 0.00% APR for the life of the loan.

Benefits of Patient Financing for Healthcare Providers

For healthcare providers, offering patient financing can support financial stability and patient satisfaction. The Patient Financial Engagement Playbook highlights that as more patients struggle with medical debt, providers are becoming increasingly reliant on patient payments to maintain operations. However, traditional billing and collection methods often result in uncollected balances and frustrated patients. 

By incorporating financing solutions, providers can: 

• Create a more manageable and consistent patient-payment experience.
• Reduce collection costs by working with a financing partner to manage eligible patient accounts.
• Enhance patient engagement by offering clear, flexible financing options that patients can commit to without fear of unexpected interest charges.
• Give patients another way to manage eligible healthcare balances over time.
• Support patient loyalty by providing a transparent financing experience.

Patient financing has become a strategic tool to improve financial outcomes for providers while maintaining strong patient relationships. To learn more about the impact on providers, watch this video. 

Benefits of Patient Financing for Patients

For patients, medical debt is a growing concern. Financing solutions offer a way to manage eligible healthcare balances without having to pay the entire balance upfront before receiving necessary care. 

The key benefits for patients include: 

• Increased accessibility to care by providing an option for managing eligible healthcare expenses over time.
• Reduced financial stress by allowing payments to be spread over time.
• Zero-interest and low-interest options, helping patients avoid high-interest medical credit cards or deferred interest plans that can lead to unexpected charges.

Financing options also improve the overall patient experience, making it easier for individuals to plan their medical expenses without fear of surprise interest charges. Watch how patient financing can support the patient experience. 

A More Manageable Way to Pay for Healthcare

Patient financing is an essential part of today’s healthcare landscape, offering another option for patients managing high out-of-pocket costs and a valuable financial tool for providers looking to maintain revenue and patient satisfaction. By offering structured, transparent financing options, healthcare organizations can help patients access the care they need without the fear of unmanageable medical bills. 

As healthcare consumerism grows, providers who prioritize patient financial engagement, through clear communication, upfront cost estimates, and flexible financing, will be better positioned to serve their communities while securing their financial health. 

Partnering with a program like CarePayment, whose financing options include recourse, non-recourse, and hybrid models, gives healthcare organizations the flexibility to choose an approach that fits their needs while helping patients manage eligible healthcare expenses through affordable monthly payments and 0.00% APR financing.

Patient Financing with CarePayment- FAQs

Is CarePayment a credit card?

No, CarePayment is not a credit card. CarePayment is an open-ended line of credit for eligible healthcare balances.

Do I need to apply for CarePayment?

No application is required for CarePayment. A participating healthcare provider must offer you the financing option, and you can make your first payment to activate your account.

Does CarePayment charge interest?

CarePayment offers no interest with 0% APR for the life of the loan.

Will CarePayment affect my credit score?

CarePayment will not impact your credit score. No hard credit inquiry is required and CarePayment does not report accounts to the credit bureaus.